Maryland Insurance Administration Bulletin 23-15 regarding residential detached condominiums

BEWARE of the recent HB98 – There are still no concrete answers to the proper coverage!

Currently, §11-114 of the Maryland Condominium Act requires that condo associations obtain insurance on the entire condominium, including the units less improvements and betterments installed by a unit owner. Starting Oct. 1, 2023, HB 98 provides an exception to this requirement, stating that master policies will only cover the common elements of residential, detached units (“cottages”), and that the owners of these units shall carry homeowners’ insurance on their units.

In response to this, the Maryland Insurance Administration issued Bulletin 23-15 that was meant to “clarify” HB98. Unfortunately, it leaves more questions than answers.

Taken from the bulletin:
1) Nothing in the statute prevents the council from “voluntarily” providing coverage to the owner of a detached residential unit through a policy obtained by the council. Does this mean that the condominium association can continue to insure these detached units on the master policy? We highly recommend if this is available to you, to get the insurance carrier to advise you in writing they will continue to cover the detached residential units.
2) Nothing in the statue requires the unit owner to identify the council as an additional insured on the unit owner’s policy. How can you comply with #1 above if the council is not listed on the homeowner’s policy? The outside of the condominium is owned by the condominium association. Would a homeowners carrier deny coverage on the building and only cover the inside of the detached home?
3) It has come to the attention of the Administration that some insurance producers are advising owners of residential detached units that the mandated homeowner’s insurance must be acquired under a separate policy issued directly to the unit owner. This is not what the statue requires. There are a lot of miscommunications regarding this comment. Some attorneys and the board are directing their homeowner to obtain this separate insurance. The bigger question here is, “How do you write coverage”? There will be different answers from each condominium association, depending on how that particular condominium master policy carrier is interpreting HB98.
4) Nothing in the statue prevents the council from voluntarily providing coverage to the owner of a detached residential unit through the policy obtained by the council. Does this mean that the current master policy can remain the same?
5) The Administration has been informed that there are councils that intend to provide the mandated coverage to residential, detached units through a policy issued to the council. Before you purchase a new policy, you should confirm what, if any, coverage will be provided by the master policy covering the condominium.

Other unanswered questions
Who is responsible for notifying the unit owners how their insurance will interpret HB98?
If you purchase a HO3 or HO5 homeowner’s policy, will the new policy provide loss assessment coverage and pay for the $10,000 deductible reimbursement, if the loss originates in your unit?
Will HB 98 require the governing documents to be revised so they are consistent with the change?
Will the definition of the unit need to be clarified to prevent any misinterpretation by the insurance carriers?
How will the budget/assessments be adjusted since the unit owner may be required to purchase their own policy?
Will the mortgage market require 2 certificates of insurance to cover the master policy and your detached single-family unit?

This bill is being challenged and will be reviewed again in the next session. Stay tuned for more information.

As a unit owner, please be sure to get clarification from the board and written instructions from the master insurance policy carrier. You need clarification on how they will proceed to address this issue and cover your home. You will also need this same clarification from your homeowner’s insurance carrier. In the event of a major claim or fire, will they pay to rebuild your home, inside and out?

Connie Phillips, CIC, EBP, CIRMS
Connie Phillips Insurance